Correlation Between TC BioPharm and Tela Bio

Can any of the company-specific risk be diversified away by investing in both TC BioPharm and Tela Bio at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining TC BioPharm and Tela Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TC BioPharm plc and Tela Bio, you can compare the effects of market volatilities on TC BioPharm and Tela Bio and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in TC BioPharm with a short position of Tela Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of TC BioPharm and Tela Bio.

Diversification Opportunities for TC BioPharm and Tela Bio

-0.68

Correlation Coefficient

TC BioPharm  Tela Bio

Excellent diversification

The 3 months correlation between TCBPW and Tela is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding TC BioPharm plc and Tela Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tela Bio and TC BioPharm is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on TC BioPharm plc are associated (or correlated) with Tela Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tela Bio has no effect on the direction of TC BioPharm i.e., TC BioPharm and Tela Bio go up and down completely randomly.

Pair Corralation between TC BioPharm and Tela Bio

Assuming the 90 days horizon TC BioPharm plc is expected to generate 7.42 times more return on investment than Tela Bio. However, TC BioPharm is 7.42 times more volatile than Tela Bio. It trades about 0.05 of its potential returns per unit of risk. Tela Bio is currently generating about 0.05 per unit of risk. If you would invest  3.00  in TC BioPharm plc on October 4, 2024 and sell it today you would lose (1.88) from holding TC BioPharm plc or give up 62.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

TC BioPharm plc  vs.  Tela Bio

TC BioPharm plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TC BioPharm plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, TC BioPharm showed solid returns over the last few months and may actually be approaching a breakup point.

Tela Bio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tela Bio are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Tela Bio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TC BioPharm and Tela Bio

The main advantage of trading using opposite TC BioPharm and Tela Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TC BioPharm position performs unexpectedly, Tela Bio can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tela Bio will offset losses from the drop in Tela Bio's long position.

The idea behind TC BioPharm plc and Tela Bio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.